Help donors help your nonprofit with a planned gift Read More

Nonprofit Parking Tax Repealed; Private Foundation Tax Simplified

On December 20, 2019, President Donald J. Trump signed into law a spending bill to fund the government through September 2020, which includes the repeal of the “nonprofit parking tax”, simplification of the private foundation excise tax on investment income, among other provisions.

Nonprofit Parking Tax Repealed

The Act signed into law repeals Section 512(a)(7) retroactively, allowing nonprofits to no longer pay the parking tax and to seek refunds for taxes already paid in 2018 and 2019. When Section 512(a)(7) was enacted in 2017 as part of the Tax Cuts and Jobs Act, transportation benefits such as parking and public transportation benefits paid by employers were subject to Unrelated Business Income Tax (UBIT). Employers were subjected to a 21% tax on parking and transit benefits, even if their employees paid for these benefits themselves through pretax salary reductions. Guidance from the IRS for filing refunds is not yet clear, but what is clear is that nonprofits will no longer be forced to divert millions of dollars away from their missions.

Private Foundation Excise Tax Rate Change

The Act also simplifies the private foundation excise tax by changing from a variable tax rate (2% and 1%) to a flat 1.39%. Previously, private foundations’ tax rate was determined annually and dependent upon the private foundation’s distributions for charitable purposes. The private section has long advocated for a flat rate tax to reduce the complexity in monitoring and adjusting the foundation’s investments and grantmaking that would trigger the higher 2% tax rate. The 1.39% tax rate is effective beginning after the date of enactment of the Act, January 1, 2020.

If you have any questions or would like more information on how these changes affect nonprofits, contact jburke@cordiapartners.com or mweintraub@cordiapartners.com.  For more information on this spending bill, read here

 

© 2019

Subscribe to our blog